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Gold/Mining/Energy : Nuvo Research Inc
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To: Tom Gordon who wrote (6588)1/27/2001 12:17:27 PM
From: Montana Wildhack  Read Replies (1) of 14101
 
Hi Tom,

I do believe Dimethaid has too many uncertainties.

In banking they use a phrase called RAROC [ray-rock].
That's Risk Adjusted Return On Capital.

Acqua, a large and publicity shy player who does many
billions of dollars of this type of business, took the
risk at an apparent 8% discount to trade weighted average
pricing on Dimethaid stock up to $50MM.

No financial institution in it's right mind would lend
Dimethaid $50 million in short term funds (120 day in
this case) for 8% with the sole recourse of selling equity
to reobtain the capital.

Acqua lives and dies by determining RAROC closely. While it
has a large portfolio of these deals giving them a form
of diversification, by further reading of the companies they
deal with - it's evidient they live on the high risk/return
end.

That doesn't change the fact that Acqua doesn't come close
to risking $50MM here without seeing a potential return on
capital of - I would guess - some 100+% well within a
calendar year.

THAT'S UPWIND OF A DILUTION AND LARGE SHARE SALE TO GET THE
CAPITAL BACK OUT.

It doesn't matter what people think. This isn't subject to
opinion. It's straight forward finance.

Acqua did not approve this deal based on Pennsaid in Europe
and Dimethaid business plan hopes and I don't believe any
other finance company would either.

For $50 million you get millions of shares of Dimethaid,
1/6 of a $60MM loss carried forward, 1/6 of a plant in
Varennes, and 1/6 of Dimethaid's intellectual property.

No.

Acqua is buying and will hold shares in a controlled fashion
of this upstart because they don't think the shares will be
expensive under $25 within 13 months. They said this in
the agreement.

Decent sales in europe (say 5-7%) can get us there but its
not easy in that timeframe.

Dimethaid has way too many uncertainties and unprovens to
take that risk for that return.

That's not the decision Acqua made.

Wolf

EDIT - ps... Rebecca, I love you
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